MBCC TH 27th January'23 - "What is priced into next week's FOMC for Dollar/Bonds/Rates? We track physical Commodity flows in Oil, Refining, what is the trade here in crack spreads?"

Q4 has seen earnings numbers lowered yet companies are still missing them and coming much lower than the 5yr average. So it is “not priced” in so to speak. We have seen Tech stocks rally hard, $TSLA is up 50% from lows, but this was never about fundamentals, as their growth numbers are too weak, it is more about people being short and liquidity. We saw weakness in MSFT 0.00%↑ guidance yet the market turned around to end the day green. Why?

The answer lies in liquidity! We track global liquidity flows and then track physical commodity flows, to see where the moves are real and where it is just front running. The chart above shows financial conditions and the Dollar set up going into the FOMC next week, what do our broad based indicators tell us?

Oil prices are not the main driver, the key is in refining, and we jump into gasoline and distillate crack spreads, looking at what is happening in China/US/Russian sanctions, it is easy for the generalist to read the basic headlines, but Oil markets are a tad bit more complicated than that, that’s what makes it so much more fun!

Also, we jump into the negative gamma positioning in the S&P 500, never underestimate the power of gamma/futures hedging, combined with algos, it can create moves that are not real. We discuss all this and more into next week and what the trades are that stand out today.

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